MIPS Sold to GPU Designer Imagination, Patents ‘Monetized’

By Tiernan Ray

Shares of MIPS Technologies (MIPS) are up 11 cents, or 2%, at $7.13 after the company this morning said it will be acquired for $7.31 per share by British graphics chip design firm Imagination Technologies (IMGUK), and will sell 498 of its 580 patents to Lambertville, New Jersey-based Allied Security Trust, which bills itself as an advisor to companies wishing to avoid the onus of patent suits.

MIPS had risen as high as 9% in pre-market trading, but cooled off at the start of the regular session.

Imagination’s graphics processing unit, or GPU, designs are used broadly throughout the chip industry, including by Intel (INTC) in its “Clover Trail” chip designed for tablet computers, as well as in the custom chips that Apple (AAPL) has designed for its iPhone and iPad, and other chips using the ARM Holdings (ARMH) chip architecture. Imagination shares rose 9 cents, or 2%, to £4.74 in London trading.

MIPS CEO Sandeep Vij remarked, “After a thorough review of a wide range of alternatives to enhance shareholder value, our Board of Directors concluded that the best alternative for the Company would be the sale of patent properties to a consortium formed by AST, and a sale of the Company to Imagination. Importantly, as part of Imagination, the MIPS architecture will continue to be supported, and protected by MIPS patents. This highly successful outcome builds upon the rich heritage of the MIPS processor architecture, while effectively monetizing the Company’s valuable patent portfolio.”

Imagination CEO Hossein Yassaie remarked that “The MIPS architecture is widely respected, and is complementary to Imagination’s existing CPU capabilities,” adding that “Post deal closure, Imagination will continue to support and expand the MIPS architecture and ecosystem, with the combined effort aiming to create a new industry-leading force in CPU development and licensing.”

MIPS said it “will retain the remaining 82 patent properties that are directly relevant and key to the MIPS architecture, and will also be granted a royalty-free, perpetual license under all of the patent properties sold to Bridge Crossing,” which is the acquisition vehicle of Allied Security.

A sale of MIPS has been a subject of speculation for some time, and in what is one of the odder statements of valuation, MIPS notes that “The total value of the transaction represents a 40% premium to the closing price on April 11, 2012, the day prior to the first public rumor of a potential sale of MIPS.”

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.